Barrick Gold’s hostile $US17.8 billion ($24.8 billion) takeover offer for Newmont Mining has hit its first hurdle after being unanimously rejected by the target’s board.
Newmont has, however, offered Barrick a counter proposal that could potentially lead to the Canadian company realising the synergies it is targeting in Nevada, the United States.
The board of Newmont has responded to last week’s bid by determining the “unsolicited, all-stock negative premium proposal” is not in the best interest of the company.
It regards Newmont’s proposed combination with Goldcorp, which would not go ahead with Barrick’s intentions, as a superior merger that would generate long-term value through an unmatched portfolio of world-class operations, projects, exploration opportunities, reserves and talent.
“Our thorough review of Barrick’s unsolicited proposal and its associated risks has reaffirmed our conclusion that the combination of Newmont and Goldcorp represents the best opportunity to create value for Newmont’s shareholders and deliver industry-leading returns for decades to come,” Newmont chief executive officer Gary Goldberg said.
“Unlike Barrick, Newmont Goldcorp will be centred in the world’s most favourable mining jurisdictions and gold districts. The combination with Goldcorp is significantly more accretive to Newmont’s shareholders on all relevant metrics compared to Barrick’s proposal, even when factoring in Barrick’s own synergy estimates.
“Realising value through Barrick’s proposal for Newmont’s shareholders hinges entirely on a new management team that lacks global operating experience and is only two months into its own transformational integration.”
Newmont announced the $US10 billion ($13.9 billion) deal to acquire Goldcorp in January.
Barrick’s proposal for Newmont focuses significantly on the synergies the two companies would create in Nevada.
According to Barrick, the combination in Nevada would merge its mineral endowments with Newmont’s processing plants and infrastructure.
Despite rejecting Barrick’s bid, Newmont has proposed a joint venture with Barrick in Nevada that would be modelled on similar terms to other successful partnerships, including agreements that already involve the companies, and also Goldcorp.
Goldberg said Newmont had consistently expressed to Barrick that it was open to a joint venture at the Nevada operations.
“In that regard, today (March 4) we have submitted a term sheet to Barrick proposing a Nevada joint venture,” Goldberg said.
“This proposal would enable both companies’ shareholders to realise the available synergies while avoiding the significant risks and complexities associated with Barrick’s unsolicited proposal.”
Barrick would hold an economic interest equal to 55 per cent and Newmont Goldcorp the remaining 45 per cent under Newmont’s Nevada JV proposal.
Newmont’s proposal in Nevada has, however, come under fire from Barrick chief executive officer Mark Bristow.
He said it reinforced the frustration Barrick had experienced in its efforts to unlock the value in the two companies’ assets in Nevada.
“Newmont’s latest proposal is essentially based on the stale and convoluted process that foundered previously. As usual, it comes with unrealistic preconditions including swapping the chairmanship and the leadership of the JV. Experience has shown us that JVs only work well when the majority owner is also the operator,” Bristow said.
“Nevada, with a combined 76 million ounces, will be worth a whole lot more if it is run by one operator. We know we can do that more efficiently than Newmont, and that it will be worth a lot more to both Newmont and Barrick shareholders under that scenario.
“By the way, based on analyst consensus NAV (net asset value), the Nevada JV ownership breakdown should be 63/37 per cent, without the full potential of the Goldrush-Fourmile project taken into account. If you factor that in, it’s materially more than two thirds-one third in favour of Barrick.”
In Australia, Newmont has three assets, including the Kalgoorlie Consolidated Gold Mines (KCGM) JV with Barrick in Western Australia.
Newmont also operates the Boddington mine in Western Australia and the Tanami operation in the Northern Territory.